UK - PNG

TRADE & INVESTMENT FORUM

Mark Baker

Managing Director, ANZ (PNG) Ltd

mark.baker@anz.com

24 April 2018

‘AA-’ RATED, ANZ IS A MAJOR INTERNATIONAL BANK ACROSS ASIA-PACIFIC

A presence in 12 markets across the Pacific for over 130

years

• Established in London in 1835 as The Bank of Australasia

• 46,000 staff across 34 countries

• Institutional strategy focused on Trade and Capital flows

Pacific-AsiaTrade: US$4.4b

PNGU$4bn

FijiUS$2bn

VanuatuU$368

TLU$342

SIU$300

Aus-NZ-PacificTrade: US$3.8b

Regional connectivity is playing to our unique position in Asia-Pacific

UK - PNG

TRADE & INVESTMENT FORUM

Mark Baker

Managing Director, ANZ (PNG) Ltd

mark.baker@anz.com

24 April 2018

KINA / USD PEAKED IN MID 2012 – PNG LNG PROJECT BUILD

0.30

0.33

0.36

0.39

0.42

0.45

0.48

0.51

Aug 11 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16 Aug 17

PGK/USD

• From 2003 – 2007 PGK/USD ranged in high .20s to low .30s

• Final Investment Decision for PNG LNG was in 2009

• Construction 2010-2013

RESOURCES: build wealth,

activity and skills

INFRASTRUCTURE: underpin attractive

business opportunities

AGRICULTURE: enable stabilising,

broad based development

• Avoid resources curse by productive investment

• Source of demand for entrepreneurs

• Avoid resources curse– lower exchange rate– income stabilisation

• Supply chain backbone

• Baseloaddemand

• Investment and technical skills

• Infrastructure prioritisation

Links between sectors

BALANCED DEVELOPMENT WILL ALLOW HIGH-QUALITY GROWTH

SOFT COMMODITY PRICES HAVE ADVERSELY IMPACTED PNG

GDP driven by external factors:

• Commodity prices

• Foreign Direct Investment

Forecasted to grow by 2.4% in 2018.

Fiscal: According to the 2018 Budget report the government expects a deficit of PGK1.987 bn or 2.5% of GDP with the debt to GDP ratio moving to 32%.

Inflation: Increasing by 1.0% to 6.9% with upside risks if PGK depreciation accelerates

FX Reserves : US$1.71Billion with some reductions possible as reserves are used for FX intervention.

Interest payments as % of GDP

Source: PNG Treasury, ANZ Research

SERVICING OF GOVERNMENT DEBT

0

1

2

3

4

5

6

1998 2001 2004 2007 2010 2013 2016 2019 2022

%

Forecast

0

5

10

15

20

25

1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022

%

Forecast

Interest payments as % of Revenue

UK - PNG

TRADE & INVESTMENT FORUM

Mark Baker

Managing Director, ANZ (PNG) Ltd

mark.baker@anz.com

24 April 2018

FOREIGN EXCHANGE ISSUES WILL NORMALISE OVER THE MEDIUM TERM

• PNG Kina is a thinly traded currency and subject to supply/demand pressures

• Onshore USD liquidity currently limited due to fall in commodity prices and volumes, against strong import demand.

• Situation will ‘normalise’ once USD inflows from new resource projects materialise.

• In the longer term (post 2020) the market will be better balanced.

• Sovereign Wealth Fund legislation provides the mechanism to manage currency issues

UK - PNG

TRADE & INVESTMENT FORUM

Mark Baker

Managing Director, ANZ (PNG) Ltd

mark.baker@anz.com

24 April 2018

PNG - THE MEDIUM TO LONG TERM FUTURE

• PNG’s long term potential is undoubted.

• The PNG LNG project shows that a world scale project can be completed successfully, with leading project economics

• ANZ’s medium term view (2 years +) is positive, driven by LNG and other resource investments

• Infrastructure to be the key enabler to drive growth higher and broader over the medium term.

UK - PNG

TRADE & INVESTMENT FORUM

Mark Baker

Managing Director, ANZ (PNG) Ltd

mark.baker@anz.com

24 April 2018